We have all heard the much used phrase “2% tax cap.” Last year almost every member of the state legislature voted to impose a limit on increases in local property taxes for all local governments. Although widely referred to as the “2% cap on property taxes,” the law actually refers to the permissible increase in the total levy, not to any single property tax payer’s property tax bill.
Unfortunately the popular sound bite has seriously misled the public about what this law will and won’t do. And school leaders, who must put their budgets before their communities for a vote, worry that a confused public will be angry when budget increases do not match the sound bite.
People are expecting their personal property taxes will increase by no more than 2% but here is what the law really does:
- People used to vote on the school district’s total budget; now they will vote only on the levy.
- The law governs the permissible increase of the levy, the total number of dollars to be collected from the entire community. It does not limit the increase for any individual taxpayer. For any given property, changes in assessments and equalization rates may result in increases greater than 2%.
- The allowable increase may be more than 2% because the permissible increase is calculated using a formula with several variables. The formula can, and often does, result in a permissible increase larger than 2%.
- If a proposed levy is no greater than the calculated permissible increase, even if it is more than 2%, school district budgets can be passed with a simple majority yes vote. Communities do have the right to approve a larger increase in the levy if 60% of the voters vote yes.
- But if voters reject the proposal twice there can be no increase in the levy over the amount levied the previous year. In the past after budgets failed, there was an allowance for inflationary increases, but no more.